[co-author: Jonathan Huie]

As we previously reported, on February 18, 2020, Medterra CBD (“Medterra”) filed a motion to dismiss a lawsuit alleging that it had misappropriated Healthcare Resources Management Group LLC’s (“Healthcare Resources”) proprietary formula for a CBD cream aimed at treating pain. In its motion, Medterra argued that Healthcare Resources failed to allege that it had provided or that Medterra had otherwise acquired any proprietary information. Additionally, Medterra claims that even if Healthcare Resources could establish that it had provided its propriety CBD cream formula to Medterra, Healthcare Resources did not take adequate steps to protect its trade secret by mandating Medterra sign a non-disclosure agreement.

In its opposition, Healthcare Resources goes on the offensive, aggressively arguing that “the high quantity of this Defendant’s arguments is starkly contrasted with their low quality.” Specifically, Healthcare Resources argues that each of the arguments raised by Medterra are “legally defective and contrary to” circuit precedent, and that disclosure of its proprietary formula is immaterial. Rather, according to Healthcare Resources, its trade secret claim is legitimate so long as (1) there was improper use of proprietary information; and (2) that use was enabled by a party who had a duty to guard and limit the use of such proprietary information.

This case, as we previously covered, is centered on Healthcare Resources’ proprietary formula for a CBD cream aimed at treating a host of health issues. Healthcare Resources had agreed to provide its secret formula for the CBD cream to Medterra in 2018 so that Mederra could in turn sell the cream under its own branding. A third-party, EcoNatura All Healthy World LLC (“EcoNatura”), was tasked with manufacturing the cream. Healthcare Resources alleges that it had already required EcoNatura to sign a confidentiality agreement prior to this arrangement. Later Medterra began working with EcoNatura directly in this venture. In turn, Healthcare Resources asked both to sign a nondisclosure agreement, but neither consented. When Healthcare Resources tested the EcoNatura-produced cream, it found that the product was not up to its standards. Subsequently, it engaged another manufacturer to produce the cream and circulated revised pricing to Medterra. Medterra did not respond, and Healthcare Resources alleges that both Medterra and EcoNatura continue to improperly use its proprietary formula and sell products derived therefrom.

Seyfarth will continue to monitor this case that involves interesting trade secret issues in the burgeoning field of CBD.